The Greek conundrum

 
Lightning illuminates the ancient Parthenon temple on top of the Acropolis hill in Athens on 14 October 2012

They are closing in on agreement. That is the word from Athens.

After three months of talking between the Greek government and inspectors from the IMF [International Monetary Fund], the EU and the ECB [European Central Bank], they have narrowed the differences over the savings Greece must make in order to qualify for the next tranche of money.

The mood music from the politicians has been positive. The Greeks, we are told in Brussels, are this time serious about reform.

The German chancellor signals her support for Greece by flying to Athens.

German Finance Minister Wolfgang Schaeuble is more explicit. He does not think there will be a Greek default: "We do not see that there is any sense to speculate on Greece leaving the euro, that would be very damaging for Greece and the euro."

Most of the summer talk about Greece leaving the euro has evaporated.

But here is the problem. The Greek government and the troika are still arguing over the figures, although they are close.

The main problem is that once again, the depth of the Greek recession has been underestimated. Tax revenues are down and the shrinking economy undermines projections.

Even so, heads of government this week at a summit in Brussels may well end up discussing a new deal for Greece if the talks in Athens succeed.

Almost certainly Greece will be given two more years to meet its commitments. The IMF backs this and so do most of the eurozone finance ministers.

More time, as Mr Schaeuble pointed out, means more money. Perhaps 20bn euros (£16bn). Perhaps more. That will have to be found. Even so, that is the easier part.

Hard choices

The strategy was for Greece to bring its debt-to-GDP ratio down to 120% by 2020. That clearly will not happen.

The IMF predicts a ratio next year of 182%. By 2020, the IMF believes they might get the figure down to 140%. The European Commission is a touch more optimistic.

What all this means is that the current plan is not sustainable. It is not working.

The Greek economy, with a few exceptions, is in free fall. Sooner rather than later, a cold choice will have to be made.

Will there be a restructuring of debt (with this time national governments and the ECB taking losses), or will there be a third bailout, or will the politicians accept the medicine is not working?

The pervading sense of unreality was broken this week by Swedish Finance Minister Anders Borg who was quoted as saying: "It is most probable they [the Greeks] will leave."

That may or may not be true, but a Greek exit cannot be said to be off the table until the key question has been answered: How will the Greek debt mountain be reduced?

 
Gavin Hewitt, Europe editor Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this
    0

    Comment number 138.

    PMK
    "If Germany would ever start anything again a dozen of 5 MT warheads would make sure there's no such aggressive country in central Europe in a future"

    does this apply to Germany only?

    But it is good that You make clear who dominates.

  • rate this
    +1

    Comment number 137.

    @136 In other words, it is unnecessary since individual governments are more than capable to decide for themselves how to spend their available funds- we don't need the EU to do that. And if fraud occurs then, it will be with the country's own money and not somebody else's.
    This nonsensical pumping round of money has got to stop.

  • rate this
    0

    Comment number 136.

    kaybraes:
    "The EU is a monstrous bureaucracy which is slowly sucking the life blood out of the tax paying people of it's member countries"

    The EU budget is approx 1 percent of the total GDP, and most of it goes back to the member countries.

    And if fraud occurs, it is mostly within the receiving countries.

  • rate this
    +1

    Comment number 135.

    131.
    D Bumstead
    @127Yet the only country that keeps raising the issue is Greece- not Poland, not Belarus, not the Ukraine. Why is that, I wonder?
    You are not right
    http://www.wsws.org/articles/2004/nov2004/pola-n06.shtml
    and
    http://usa.usembassy.de/etexts/ga7-000717e.htm
    see section Central and Eastern Europeans.

    Germany owes and no one doubts it, except you.

  • rate this
    +1

    Comment number 134.

    "I cannot imagine that one of the countries involved will ever fight against the old enemies again"
    +++


    If Germany would ever start anything again a dozen of 5 MT warheads would make sure there's no such aggressive country in central Europe in a future.

  • rate this
    -1

    Comment number 133.

    One of my coments is under further consideration.

    I recommended a movie showing the chanceless fight of indigenous people against the white in America.

    If somebody misunderstood this as advertising:

    it was not

    This movie is running right now on german-language ARTE.

  • rate this
    +2

    Comment number 132.

    The Euro is in the pan, it only needs someone to flush it down to where it belongs. Hopefully when this happens the EU itself will slip quietly round the U bend . The EU is a monstrous bureaucracy which is slowly sucking the life blood out of the tax paying people of it's member countries, while it's bureaucrats grow fat and rich on cash they do not and never have worked for and do not deserve.

  • rate this
    +1

    Comment number 131.

    @127 Assuming that reparations are due at all (which they are not), Poland, Belarus and the Ukraine have a far, far greater claim than Greece has. Yet the only country that keeps raising the issue is Greece- not Poland, not Belarus, not the Ukraine. Why is that, I wonder?

  • rate this
    +2

    Comment number 130.

    Positive Noises? only to cover up the complete mess the Eurozone is in temporarily. Greece should leave the Euro as just a burden on us. And Spain,Italy and to a extent Portugal and Ireland are buckling,and things dont look to good for the French either. The EU is a grim mess!

  • rate this
    0

    Comment number 129.

    @97
    "Some Europeans may not remember history of WWII but Americans like me sure do"
    We had the holocaust.
    And we had WW2.
    And unlike the US, us, countries like Britain, France, Germany, Italy, Austria ( and all the others in Europe ) had the war directly in our towns and villages.

    And this is why I cannot imagine that one of the countries involved will ever fight against the old enemies again.

  • rate this
    +1

    Comment number 128.

    Marg: so where are the memorials?

    Have they ever asked for them?

    That being said, it is a tough time for funding

    You were talking about African Americans;
    They did a MLK Jr statue in DC not long ago

    Thing is it was Made in China
    where they don't allow freedom of speech

    How ironic is that?
    I believe his family chose such

    Should have been Made in USA just like MLK Jr was

  • rate this
    0

    Comment number 127.

    122D Bumstead
    They owe something, as to what Greece will get is anyone's guess
    http://www.guardian.co.uk/commentisfree/2011/jun/21/germany-greece-greek-debt-crisis
    start at a trillion and meet in the middle maybe
    http://www.forbes.com/sites/timworstall/2012/09/12/does-germany-really-owe-greece-a-etrillion-in-war-reparations-probably-not-no/
    Germany had no problems with the London debt agreement

  • rate this
    0

    Comment number 126.

    #112 Dmr

    "You're arguments are often so obscure, no way can the holocaust compare to any other crime in history."

    --only by those not admitted to.

  • rate this
    +4

    Comment number 125.

    Re#116.kane

    The only credible Nobel Prizes are scientific ones awared typicaly 25-35 year after a discovery/invention when there's no doubt about their impact.

    As for Peace Prizes (not established by Nobel, btw.), after the likes of Le Duc-tho, Yaser Arafat and a tree hugger who claimed "HIV was created at Ft. Detrick to depopulate Africa" - it's become bad joke and a propaganda tool.

  • rate this
    -3

    Comment number 124.

    123 Lucy

    Marg: You are out of your depth
    Sometimes but isn't it healthy to want to learn?

    Yes it is - so where are the memorials?

  • rate this
    0

    Comment number 123.

    Kane: Germany wipe it's debt clean

    Imagine if that had happened initially

    Altho everybody wants their dues
    it would have saved Germany+Europeans trillions
    if they had simply wiped out the debt in first place

    Kinda like bankrupcy here in USA
    (you can wipe out anything but student loans)

    Marg: You are out of your depth

    Sometimes but isn't it healthy to want to learn?

  • rate this
    0

    Comment number 122.

    @118 Greece should indeed leave the EZ, but I don't understand your point about Germany wiping its debt to Greece clean since Germany doesn't have a debt to Greece in the first place.

  • rate this
    -2

    Comment number 121.

    #118 kane

    the UK is next in line for Greek claims -the Civil War

    ..ask Danaos.

    "Did you see how many Mau Mau were celebrating and dancing at the good news of the 3."

    --yes, and 1/3 rd of the world with them.

    -- or did you again ´miss the point´?

  • rate this
    +1

    Comment number 120.

    110.LucyJ
    Marg: There are thousands of memorials to the people murdered by the Nazis right across Europe [none to murdered by the Soviets]

    Pmk: genetical (DNA) analysis proves beyond any doubt that so called Native Americans were de facto 1st refugees from the future Soviet Union

    At what point do immigrants become natives?
    +++



    According to our friend mh, in case of US - never.

  • rate this
    -3

    Comment number 119.

    110 Lucy

    "Yet you forgot"

    Millions of people visit these memorials and all countries send parties of schoolchildren to show them what happend. As you haven't answered my questions regarding your own memorials I take it there are none. Triumphalism is more seductive than quiet introspection.

    I'm afraid I have to agree with an earlier posting here: You are out of your depth.

 

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